How To Adjust Your Budget To An Income Boost

By Phil VillarrealFebruary 27, 2012

Maybe it’s been so long since you’ve gotten a raise that you wouldn’t know what to do with the money when it hit you. Such a problem is a nice one to have, but still a problem. Act carelessly with your newfound income and you’ll hardly notice that you’ve got it.

Adaptu recommends guidelines for working increased funds into your budget. The key is to recalibrate your goals to match your megabucks. Ideas include starting new accounts earmarked for travel, home upgrades, a new vehicle, or retirement. You can also accelerate debt payments or allocate the money toward improving your daily life, on small creature comforts that will make you appreciate your new income.

What you don’t want to do is forget your budget entirely because you’re content with your new cash flow. Lazy, aimless splurges can nullify any advantages your raise might give you.

I think most people are happy to get a raise that even comes close to covering the increase in their health insurance premiums. It’s definitely rough to have a smaller paycheck on Jan 15th than Dec 31st.

Seriously. My company gave us a very nice 2% cost of living raise in December…then announced a new health insurance plan starting Feb.1 with higher premiums. For me it ate up almost all of the raise.

On top of that butter is double what it was 3 years ago and I can’t get a pound of crappy ground chuck for less than $4.50. Thinking about buying my own damn cow, I’ll name her Sparkles and she can roam free and happy until our freezer needs filled.

It’s been 4 years here too. And it’s worse than that… PTO cut in half, other benefits suspended or eliminated, and the newest trick from new management is to make everyone miserable so people leave and they can replace them with low-paid workers.

1) Determine new income
2) Reduce by estimated taxes, 401k contributions, etc. that are pretty guaranteed
3) Determine if you want to save the money, improve your class of living, dedicate it to paying some other debt or obligation, or a combination of the three

Gas has shot up 12 cents a liter here in the last week (one day last week it went from 1.049 dollars a liter to 1.179 dollars – so from 3.98 to 4.45 a gallon) – which means 45 cents per gallon for you people south of the border. It was already costing me $40 a week to drive to work.

Gotta love that both the US and canada are still subsidizing oil companies. Fucking hell.

I think it’s more to do with a large increase due to promotions or whatever. My wife and I doubled our income in past 10 years. At first we kept expenses the same and paid off all debts. Then once that was out of the way, disposable income soared since all those payments were gone. Then we started to save, a lot.

The key is to not enter into transactions that increase your monthly obligations. We still have the same simple home, I buy inexpensive cars (that I pay cash for, no debt) and when we travel, all those costs are paid for as they are incurred.

This way when our income goes down due to upcoming retirements, all we need to do is scale back on all that one-time splurging expenses. Our day-to-day expenses are still low.

I know way too many people who did well during the dot-com boom days, blew the money on big homes and expensive cars, and are now in a royal debt-laden pickle.

Don’t. That was literally the first response that popped into my head.

I’m finally to the point where I can cover both my and my husband’s debt payments every month if business is slow for him, plus everything else without dipping into savings or my line of credit. Any future raise I get is going straight into the savings account (which is pretty non-existant right now). It’s incredibly frustrating for me to know I’m spending every penny I earn.

My thoughts as well. Unless paying your debt down faster is adjusting. Once you have your debt in a good place (it may be difficult to eliminate it) and your home is worth much more than you owe, then you can look into investments or purchases. The essential lesson is not not to grow your debt to match your new income.

Exactly. Unless you’ve paid off all debt, and are more than on track saving for kids college, retirement, home down payment, etc, then just put the money towards debt and savings. That will cover 98% of everyone. The small number remaining that have “extra” money won’t need an article like this.

I recently got a promotion with a nice raise (it’s good to have in-demand skills, even in a down economy). While I’ve been tempted to buy a new car since my current car is nearly 8 years old and bought when my pay was 1/3 of what I am making now, the thought of having a car payment is enough to make me put it off until the old car is barely carrying me to work.

I do notice that I am more likely to splurge on dinner out or something nice, but not to the extent of eating up my raise.

It’s also been nice to make great strides in my debt payment, which I think is the biggest reward right now.

I read this, I laughed. No increases for several years. Increases in taxes and health insurance copays, plus food and fuel costs have gone through the roof.

I need more articles like “how to weave fabric to make your own clothes” or “home made soap – pros and cons” or “Shoemaking 101″ and the ever famous “lure game animals to your back porch for fun and profit”.

asian grocery store. seriously, i buy bags of cheap pork neck bones, cook them down to make treats for my dog out of the meat, stock for gravy and render off the lard for cooking, dog treats, and seasoning my cast iron pans. since i have a chimenea and a constant source of ash i have been considering making my own lye soap.
but the asian grocery near me also sells just slabs of pork belly fat for less than a dollar a pound

Nice problem to have…I haven’t had a raise in 5 years. Meanwhile, my health insurance premiums have gone up and my state raised its income tax rate. Even before accounting for inflation, I am worse off now than I was 5 years ago :(

how about when your raise drops your take home pay? i need adjustments for that. got a very tiny raise of $218 this year [for the year] which dropped my take home pay by $10 per biweekly paycheck. gross loss of $42 for the year. and yes, i checked my withholding, there aren’t any adjustments i can make to fix it.

Mrs. Sendbillmoney was in a great job getting considerable annual raises. I pointed out that we were doing fine, so let’s forget she got the raise and dump the whole thing into her retirement account. That has been the annual tradition until now, because she maxed it out without feeling any impact.

I got a dollar an hour raise after my supervisor left at my previous job. They were afraid I would bail too. Unfortunately, things right after that got so expensive that I had to take a freelance second job to make ends meet. It did not help much and now I have no job. Not really sure what to do, but I’m trying to think outside the box a little.

Very true; I can’t lift heavy stuff anymore though, due to injuries from my previous job. If all else fails I guess I can go apply at Fazolis. I can walk there from my house. I don’t want to go back to food service, though. Ick. Ick. Ickety ick.